The Governance Role of Multiple Large Shareholders: Evidence from the Valuation of Cash Holdings

Journal of Management & Governance, Vol. 17, 2013

43 Pages Posted: 11 Nov 2013

See all articles by Najah Attig

Najah Attig

Saint Mary's University - Department of Finance & Management Science

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

Sorin Rizeanu

University of Victoria

Date Written: November 10, 2013

Abstract

This paper investigates the governance role of multiple large shareholders (MLS, henceforth), as evidenced by their impact on the valuation of cash holdings. For a sample of 2,723 firms from 22 countries, we find that the presence of MLS enhances the valuation of firms’ cash holdings. In particular, we show that the valuation of cash is positively associated with an even distribution of blockholders’ voting rights and with higher contestability of the largest shareholder’s control. We also show that the impact of MLS on the valuation of cash holdings is more pronounced for family-controlled firms, consistent with investors perceiving family owners as associated with greater expropriation risk. Overall, our results contribute to the literature on corporate governance by showing that MLS improve internal monitoring and moderate the agency costs of firms’ cash holdings.

Keywords: corporate governance, multiple large shareholders, cash holdings, firm performance

Suggested Citation

Attig, Najah and El Ghoul, Sadok and Guedhami, Omrane and Rizeanu, Sorin, The Governance Role of Multiple Large Shareholders: Evidence from the Valuation of Cash Holdings (November 10, 2013). Journal of Management & Governance, Vol. 17, 2013. Available at SSRN: https://ssrn.com/abstract=2352651 or http://dx.doi.org/10.2139/ssrn.2352651

Najah Attig

Saint Mary's University - Department of Finance & Management Science ( email )

Halifax, Nova Scotia B3H 3C3
Canada
902-491-8679 (Phone)

Sadok El Ghoul

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami (Contact Author)

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

Sorin Rizeanu

University of Victoria ( email )

3800 Finnerty Rd
Victoria, British Columbia V8P 5C2
Canada

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